It’s always a challenge to find new and interesting ways to describe how terrible the labor market it. This is even more true as the unemployment rate is starting to decline though the employment-to-population ratio is roughly staying the same.

We tried to figure out the real rate of unemployment last week, noting that the labor force population – which is the sum of those working (employed) and those looking for work (unemployed) – has been flat since 2007. What does this look like on a longer timeframe? Is this a normal event that we periodically experience? Pulling data from FRED (population, labor force), it looks like this:

Even though the population is growing, the labor force has been flat for about four years now. Even worse, we don’t have a similar flatline anywhere else in the post-Great Depression to study to get some sense of the consequences of this. The recessions of the early 1960s and 1990s had flatlined labor force growth, but nothing like what we see how. How do we even go about understanding if and when it’ll converge back to trend?

4 Responses to A Quick Graph on the Historical Labor Force Population and Its Current Flatline

In line with the data above two interesting indicators to follow are : labor force participation rate (falling steadily since 2000 partly for demographic factors – see chart below), and employment / population ratio which has cratered during the recession. A related indicator independent of demographic factors is the same ratio for workers 25-54 years of age.

A simpler question might be how can this happen? If the population and people are aging into the workforce, but its numbers are not increasing, what is happening to the people? Do they die? emigrate? Disperse into thin air? If in some way they “drop out” of the labor force, what happens to them? I am interested because I fear that I may be one of them, and I want to know what to expect.